Friday, October 5, 2007

September Job Numbers

The stock market rose significantly today on the much-awaited September employment situation release from BLS, which said: "Nonfarm payroll employment rose by 110,000 following increases of 93,000 in July and 89,000 in August (as revised)." These figures are not such a drop from the first half of 2007 as was previously reported. The markets were pleased.

But the "as revised" parenthetical comment refers to a major swing in the August numbers. The BLS's August employment situation release had reported a decline of 4,000 jobs, and the revision is to a growth of 93,000 jobs. What happened?

Philip Rones, the Acting U.S. Labor Commissioner, in his accompanying statement reports the revision as follows: "The estimates of payroll employment change for July and August were revised upward. The July change rose from +68,000 to +93,000 and the August change from -4,000 to +89,000. After incorporating these revisions, average monthly job growth for June through September is 90,000,compared with an average of 147,000 for the first 5 monthsof the year. Nearly all of the August revision reflected an upward adjustment to government employment, particularly local education. As noted last month, employment estimates for local government education can be volatile, particularly during the summer months. Initial estimates of employment in local education typically are based upon a smaller percentage of survey responses than in other sectors. This lower initial response can make estimation more problematic in months when school sessions begin and end."

Agora Financial in its 5-minute report today isn't satisfied with this explanation and wonders whether the preliminary August numbers somehow landed on the weak side to help justify the September 18 cut in the Fed's target rate by 50 basis points. With such a large revision, the question is inevitable. Future revisions will surely be watched closely.

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